Sumitomo Mitsui, Banks Need More Capital

Darlington Musarurwa
29 Dec, 2009
New York City

In weak Tokyo trading stocks traded sideways as banks in Japan look for more capital. Sumitomo Mitsui Financial Group is looking to raise additional capital. Banks in Japan may take ten years before they meet international capital requirements. JAL labour union to accept pension benefit cuts.

[R]5:00 AM New York, 7:00 PM Tokyo – In weak trading stocks traded sideways as banks in Japan look for more capital. Sumitomo Mitsui Financial Group is looking to raise additional capital. Banks in Japan may take ten years before they meet international capital requirements. JAL labour union to accept pension benefit cuts.[/R]

Japanese stocks gained fractionally led by retailers on earnings expectations. However, gains were pared on news Sumitomo Mitsui Financial Group is considering share sale to boost its capital.

In Tokyo trading Nikkei 225 Stock Average rose 0.04% or 3.83 to 10,638.06, and the broader Topix Index edged up 0.1% to 915.87.

In the first section of the Tokyo Stock Exchange 6.9 billion shares valued at 459 billion yen were traded and in the second section 198 million shares worth 1.9 billion yen changed hands.

Of the Nikkei 225 index stocks, 90 gained, 111 dropped, and 24 were unchanged. Okuma Corp. led gainers in the index shares with a rise of 2.7% followed by Toppan Printing increasing 2.7%.

JAL Union to Accept Pension Benefit Cuts

Japan Today reported the leadership of the largest labour union JAL Friendship & Improvement Organisation plans to accept a company proposal to cut its pension benefits as a part of company restructuring. Japan Air is expected to receive government support and investment from private equity led consortium that may involve American Airlines or Delta Air.

According to the report, JALFIO has reached a decision as it “sees that changing the pension system is a necessary step at present” and cuts in pension will help recovery of the carrier.

Sumitomo Chemical Co. Buys 20% Stake in Nufarm

Nufarm Limited reported today it has signed a Memorandum of Understanding with Sumitomo Chemical Co. Ltd. through which it has recommended the proposal from the Japanese firm to buy 20% for $14 cash per share via a tender offer.

Under the agreement, Sumitomo will be invited to nominate one Director to the Nufarm Board upon successful completion of the tender offer.

Nufarm is also subsequently expected to undertake a $250 million equity capital raising via a renounceable entitlement offer to all Nufarm shareholders, including the new suitor.

Nufarm chairman Kerry Hoggard said Sumitomo’s offer places “an appropriate value on the company” and provides shareholders a fair price.

Sumitomo has since received approval from Australia’s Foreign Investment Review Board.

SMFG to Consider Share Sale

Sumitomo Mitsui Financial Group president Teisuke Kitayama said the lender will consider selling more stock to boost capital according to Bloomberg News.

The bank’s agreement with shareholders not to sale new stock expired on December 21.

Japan’s Financial Services Agency indicates banks might have 10 years or more to meet new capital standards recommended by the Basel Committee on Banking Supervision.

Kitayama also said the company will try to reduce its holdings of equities on increased volatility.

Nikkei Movers

Japan Airlines Corporation led the decliners in the Nikkei 225 Stock Average with a loss of 8.3% followed by losses in Pioneer Corporation of 4.6%, in Shiseido Company, Limited of 3.2%, in Fuji Electric Holdings Co., Ltd 3.0% and in Sumitomo Mitsui Financial Group, Inc 2.7%.

Okuma Corporation led gainers in the Nikkei 225 Stock Average with a rise of 2.6% followed by gains in Toppan Printing Co Ltd 2.6%, in Isetan Mitsukoshi Holdings Ltd of 2.5% and in Mitsui & Co Ltd of 2.0%.

Other Movers

Fast Retailing Co added 1.6% to ¥17,650.00.

Japan Airlines Corporation fell 8.3% to ¥88.00 after the carrier’s amid talk that it may be put through bankruptcy court as part of a state bailout.

Mitsubishi UFJ Financial Group, Inc dropped 0.8% to ¥454.00 after the commodities trader will seek to complete the sale of ¥1 billion ($146.4 million) of bonds on China''s interbank market via its Chinese unit early next year, according to Agence France-Presse, which cited a Tokyo based spokesman for the bank.

Pioneer Corporation decreased 4.6% to ¥289.00 after the maker of car navigation systems and audio equipment said that the timing of its planned ¥2.5 billion new share offering to Honda Motor Co. has not been determined. The company said the delay is not likely to affect its business operations.